Mortgage rates are likely to remain elevated through 2024, with interest rate forecasts to hover above 7% this year.
In a report published this month, government-backed mortgage finance giant Fannie Mae estimated that the rate for the 30-year mortgage loan could increase to 7.1% in the coming quarters this year before easing slightly at the end of 2024. That is a significant increase from the 6.4% forecast it held in April. Fannie Mae also forecasted the rate for the 30-year mortgage to hover around 6.7% in 2025.
Freddie Mac, also a government-sponsored enterprise, predicted that mortgage rates would remain closer to 7% through the end of the year before falling in 2025.
"Our baseline scenario has one Federal Reserve rate cut towards the end of the year. As a result, we expect mortgage rates to remain elevated through most of 2024," the government-sponsored enterprise wrote in its midyear outlook.
Similar forecasts have been made by chief economist of the National Association of Realtors Lawrence Yun, head of retail lending at the Bank of America Matt Vernon, and senior economist at KPMG Economics Yelena Maleyev.
The forecasts come as mortgage rates for the 30-year loan fell to 6.94% in the week ending May 23--- declining 0.08% from the week prior, per Freddie Mac's Primary Mortgage Market Survey.
Home Prices Also Remain Elevated
In addition to mortgage rates remaining elevated, home prices have increased. In fact, the median home sale price in the US hit a record $387,600 during the four weeks ending May 19. That is up 4% from a year earlier, Redfin reported. This brings the median monthly housing payment to $2,854, which is about $20 shy of April's all-time high.
The high home prices and elevated mortgage rates pushed pending home sales down 4.2% year-over-year. That is the biggest decline recorded in three months.
"Move-up buyers feel stuck because they're ready for their next house, but it just doesn't make financial sense to sell with current interest rates so high," Sam Brinton, a Redfin Premier agent in Salt Lake City, said in the report.
